Everything Old is New Again: Will Narrow Networks Succeed Where HMOs Failed?

As health insurers try to navigate the new limitations set forth under the ACA, including prohibitions on denying individuals with pre-existing conditions and limitations on the rating of patients, insurers are looking towards models that will enable them to control costs without access to their usual tools. What they have developed is not so much a new insurance model, but actually a concept that first arose during the rise of managed care; that is, limited provider networks utilized within health maintenance organizations (“HMOs”). These “new” insurance products, often referred to as narrow networks or high-performance networks, offer beneficiaries a more limited network of physicians typically in exchange for lower premiums. These insurance plans are becoming increasingly common both on the federal and state health insurance exchanges as well as in insurance product offerings outside the exchanges. As these limited provider networks become more prevalent, there is evidence of a number of similarities between the narrow networks of today and the HMOs that increased in popularity during the 1980s and 1990s. But, if narrow networks are in fact simply a redux of HMOs, can it be surmised that narrow networks are likely be a short-lived trend? Will narrow networks fall into disfavor and suffer the same consumer backlash and financial challenges as the HMOs of twenty-plus years ago? Or, is there something unique and distinct about the narrow networks arising in the current health insurance market that will create greater longevity for these insurance products that was not achievable with HMOs, despite their similarities? This article argues that the narrow networks that have emerged in the current healthcare marketplace are indeed unique and distinct from their HMO predecessors and, because of such distinctions, appear poised to experience greater success and longevity than HMOs. Part II of this article will examine the history of limited provider organizations, specifically HMOs, including their rapid rise and then subsequent descent into disfavor with consumers and providers alike. It will then review the movement back towards limited provider networks, defining what constitutes a narrow network and highlighting current prevalence of these products on the insurance market. Part III will then review the existing legal structure (much of which arose during the time of HMOs) surrounding narrow networks, including examination of a few recent lawsuits against insurers under both federal and state law and the state and federal statutes designed to protect both providers and consumers. This Part will identify some of the challenges for providers and consumers with the existing legal structure in connection with taking action against limited provider networks. Next, Part IV will consider the advantages and disadvantages of narrow networks and forecast the potential outlook for narrow networks based on such factors. Part IV will also examine the current activities of certain “high-cost providers,” such as academic medical centers, to create their own alternative networks or alternative product offerings, and what impact such activities might have on the sustainability of narrow networks. Finally, in Part V, this article will conclude that narrow networks are likely to realize more sustained longevity and success than their HMO predecessors because of the following three distinctions between narrow networks and HMOs: (a) unlike HMOs, narrow networks, especially those offered on federal and state health insurance exchanges, are consumer-driven products, responding to a specific need for insurance offerings at a lower cost; (b) existing laws in place to protect against potential ills of limited provider networks are either too narrowly focused on HMOs or too discretionary for consistent application and enforcement against modern narrow network products; and (c) so long as large and influential high-cost providers continue to create alternative structures rather than fight exclusion from narrow networks, there is a greater likelihood of a co-existence of both narrow networks and alternative networks (which cater to different segments of the population) and thus greater longevity of narrow networks